US Plans Limits on Chinese Investment in Tech Firms

June 25, 2018 Updated: June 25, 2018

WASHINGTON—The U.S. Treasury Department is drafting restrictions that would block firms with at least 25 percent Chinese ownership from buying U.S. companies with “industrially significant technology,” a government official briefed on the matter said on June 24.

The official, whose comments matched a report by The Wall Street Journal, emphasized that the Chinese ownership threshold may change before the restrictions are announced on June 29.

The move marks another escalation of President Donald Trump’s trade conflict with China.

Tariffs on $34 billion’s worth of Chinese goods, the first of a potential total of $450 billion, are due to take effect on July 6 over U.S. complaints that China is misappropriating U.S. technology through joint-venture rules, acquiring American firms that develop sensitive technologies, and other policies.

The Treasury investment restrictions are expected to target key sectors, including several that China is trying to develop as part of its “Made in China 2025” industrial plan, the U.S. official said.

Among its objectives, the plan aims to upgrade China’s capabilities in advanced information technology, aerospace, marine engineering, pharmaceuticals, and robotics, among others.

The Wall Street Journal also said the U.S. Commerce Department and National Security Council were proposing “enhanced” export controls to keep such technologies from being shipped to China.

Spokespersons for the Treasury, Commerce Department, and the White House did not immediately respond to Reuters’ requests for comment on the proposed restrictions.

The government official said the Treasury would invoke the International Emergency Economic Powers Act of 1977 (IEEPA) to devise the restrictions.

The act gives the president sweeping authority to restrict assets based on national security concerns. IEEPA was invoked broadly after the 9/11 attacks in 2001 to cut off financing for terrorist networks.

The Journal said the administration would look only at new deals and would not try to unwind existing ones, adding that the planned investment bar would not distinguish between Chinese state-owned and private companies.

From Reuters